IMF | CCAMTAC

National Workshop on Macroeconomic Analysis / Financial Programming and Policies (October 7–11, 2024). IMF CCAMTAC successfully delivered a national workshop on Macroeconomic Analysis / Financial Programming and Policies in Baku, Azerbaijan. The workshop was hosted by the Center for Analysis of Economic Reforms and Communication of the Republic of Azerbaijan. 24 officials from government institutions of Azerbaijan attended the workshop to enhance their skills in macroeconomic forecasting and policy analysis. While working in groups participants used IMF-ICD’s Comprehensive Adaptive Expectations Model calibrated to Azerbaijani data to make baseline projections and simulate different shock scenarios. The team continued piloting its train-the-trainer initiative and finished the workshop with a presentation from CAERC on how to track results of reforms and participant presentations.

Macroeconomic Frameworks (May 27–June 7, 2024). The mission worked on integrating the CAEM within the Ministry's economic projection practices. Significant strides were made in synchronizing the CAEM with the Ministry’s main projection framework. The new framework will be tested in a shadow forecasting round later this year.

Macroeconomic forecasting framework (August 7 – 18, 2023).

A technical Assistance team visited Baku to work with experts from the Ministry of Economy of Azerbaijan. The focus was on developing a new macroeconomic forecasting framework to complement the ministry’s existing prognostic apparatus and processes. The ministry team prepared a mock-up macroeconomic outlook, quantitatively assessed risks to the outlook, discussed economic policies’ strategic positioning and practiced communicating a forecast narrative to policymakers, including communication of risks and uncertainties using techniques like forecast fan-charts and risk-web diagrams. The mock-up forecast exercise provided a useful platform for testing the new technology in situations similar to its future actual settings. It also helped inform priorities for future development in the spirit of our agile project management approach.

Macroeconomic Frameworks (December 5 – 16, 2022).

The TA mission was conducted in a hybrid format for the Ministry of Economy. The mission team merged the macroeconomic projection tool components, based on the Comprehensive Adaptive Expectations Model, with a semi-structural simulation model developed during previous missions. The experts run the first test of the forecasting and analytical framework functionalities as a whole in a forecasting-lite exercise (shadow forecasting). The core group of officials of the ministry gained a holistic view of forecasting functionalities and requirements, as a first step to taking technical command of the model and fully operationalizing it in the next stages of the project.

Macroeconomic Frameworks (June 20 – 24, 2022).

The CD mission worked on the Comprehensive Adaptive Expectations Model (CAEM) for Azerbaijan. The mission tested a pilot version of a semi-structural model, with rich endogenous economic relationships, oil-/non-oil sectoral details, and monetary and fiscal policy feedbacks. A particular focus was paid to the solution methods of CAEM in Excel -- their numerical viability and ease-of-maintenance going forward by users with basic modeling experience. The mission appreciated the progress that the Ministry of Economy’s staff made in estimating the core CAEM structural equations and using previously implemented innovations.

Enhancing Modelling Capacity (March 14–18 and April 11–15, 2022)

This was the third mission under a three-year Institute for Capacity Development (ICD)/CCAMTAC project. The purpose of the mission was to continue building institutional capacity in macroeconomic forecasting and policy analysis systems at the Ministry of Economy, in line with the action plan agreed with the authorities. The mission (i) followed up on the status of previous recommendations; (ii) developed a pilot version of the macroeconomic projection tool based on the IMF’s ICD Comprehensive Adaptive Expectations Model; (iii) delivered new tools for improved monitoring of the real sector; (iv) helped improve analytical content of the Quarterly Macroeconomic Situation Report; and (v) continued hands-on training of the core group of technical staff of the ministry to enhance modeling capabilities by starting to build the projection tool.

Training Core Modelling Group in Macroeconomic Analysis (December 6-10, 2021)

As follow-up to the earlier mission in November, in cooperation with the authorities, the mission team began strengthening the data management practices and data analysis skills in the real sector. Specifically, the team (i) reviewed and suggested improvements to the organization of macroeconomic data and databases, and quarterly macroeconomic situation reports; (ii) delivered training on the principles of macroeconomic diagnostics and techniques for building economic narratives; and (iii) together with the staff, estimated a simple structural vector autoregressive model and showed an initial assessment of the transmission mechanism of elementary economic shocks in the context of the last two business cycles in Azerbaijan.

Training Core Modelling Group in Financial Programming and Enhancing Modelling Capabilities (November 22 - 26, 2021)

The team began the groundwork for developing a macroeconomic projections’ tool. Specifically, the team (i) delivered a training and transferred knowledge on the basics of financial programming centered around a comprehensive adaptive expectations template; (ii) presented the South Africa case study of the template; and (iii) agreed with the authorities on the minimal required specifications for the new projection and simulation tool.

Scoping Mission (July 26-30, 2021)

CCAMTAC delivered a virtual scoping mission to the Macroeconomic Analysis and Forecasting Department of the Ministry of Economy of Azerbaijan. The mission took stock of existing capacity and, together with the authorities, drafted an action plan for strengthening the analytical, modeling and forecasting system of the Ministry. The planned program will be built on past TA by partners and be coordinated with relevant stakeholders.

Macro Forecasting (March 29 - April 2, 2021)

A virtual TA mission made proposals to streamline the list of macroeconomic indicators that the Ministry of Economy (MoE) prepares as input for the Ministry of Finance (MoF) for the preparation of the medium-term expenditure framework (MTEF). In determining the list, two angles were considered: the necessary cross-sectoral input needed by the MoF for their projection tools; and the macroeconomic forecast disclosure practices that would ensure transparency and accountability. In addition, the mission initiated some scoping for a requested future FP2.0 TA project to review and strengthen the current macroeconomic forecasting tools and processes. The mission also provided information on good practices regarding the publication of macroeconomic forecasts.

Fiscal Risks Management (April 15–29, 2022)

At the request of the Ministry of Finance, CCAMTAC delivered a remote workshop to Azerbaijan to provide training to the staff on (i) macroeconomic fiscal risks; (ii) long-term fiscal sustainability; (iii) SOE fiscal risks; and (iv) public private partnerships (PPPs) fiscal risks. The training drew on international experience, with an emphasis on the Caucasus and Central Asia region, and on the guidance in FAD’s Analyzing and Managing Fiscal Risks – Best Practices 2016 and Fiscal Transparency Handbook 2018. The training stressed the central role disclosure plays internationally in fiscal risks management.

Macro Fiscal Forecasting (April 12 - May 14, 2021)

An expert assisted the authorities to further develop and operationalize a rules based macro-fiscal framework through forecasting and analysis. The work involved reviewing and improving the tools that are currently used in the Ministry of Finance to build a credible macro-fiscal baseline for the budget consistent with their fiscal rule, evaluate medium- and long-term macro-fiscal scenarios under various assumptions, and delivering any needed training to the macro-fiscal team.

Digital Banking Webinar (September 20, 2022).

This bilateral webinar with the Central Bank of the Republic of Azerbaijan was aimed to provide background information to the authorities about the current Digital Banking (DB) landscape across the globe, including various approaches utilized by different jurisdictions about the treatment of digital banking from regulatory and legal perspectives. The delivery was aimed for the on and off-site supervision staff dealing with DB. Close to 20 participants from financial stability and supervision departments joined the webinar which included presentations by the authorities and experts from IMF’s Monetary and Capital Markets Department (MCM) going over the current state of FinTech in Azerbaijan, current developments across the globe as well as the treatment of DB in different jurisdictions.

Strengthening Banks’ Regulation and Supervision Frameworks (September 27 – October 1, 2021).
The purpose of the mission was to review the Central Bank of Azerbaijan’s draft of risk management guidelines, including Market Risk Management Guideline and Operational Risk Management Guideline, and to provide recommendations to align them with international standards and principles, including requirements of Pillar 1 and 2 of Basel II/III risks.

Revising monetary policy instruments (April 15–26, 2024). A joint CCAMTAC, MCM and Swiss National Bank TA mission visited the Central Banks of the Republic of Azerbaijan (CBAR) in Baku to provide support on enhancing the monetary operation and policy implementation framework. The main topics covered were: (i) revision of the current operational framework of monetary policy and instruments, (ii) FX operations, and (iii) enhancement of liquidity management and liquidity forecasting. The mission also developed and set up the tool for forecasting autonomous factors of liquidity using the advances statistical techniques. The follow-up mission is envisaged later to discuss the development of the interbank market and enhancing central bank communication practice.

Enhancing Central Bank Communication (virtual June 10-14, 2024 ; on-site June 20 - 28, 2024 ). At the request of the Central Bank of Azerbaijan (CBA) a technical assistance mission held virtual meetings and visited Baku to assist the authorities in strengthening central bank communication. The team carried out a diagnostic of the current framework and provided recommendations aimed at enhancing the institutional communication framework, including the operationalization of a more comprehensive communication strategy, strengthening the role of the communication unit, reviewing communication tools and channels and discussing the key principles for crisis communications. The mission also focused on enhancing monetary policy communication, reviewing the monetary policy communication cycle and providing advice on the structure and content of key policy documents, as well as on the mechanisms to assess the effectiveness of monetary policy communication.

Monetary and Foreign Exchange Operations (January 15 - April 30, 2021)

The virtual mission reviewed past TA, assessed TA needs, and provided the future CCAMTAC resident advisor on central banking with input for a work plan.

GFS/ PSDS mission (April 15–19, 2024). The aim of this remote mission was to assist the compilers in reducing the discrepancies that existed in the data for the several government agencies. The team reviewed the 2022 annual GFS compiled by the authorities prior the mission. The following main data providers for compilation of GFS attended sessions: the State Treasury Agency, the State Oil Fund of Azerbaijan, the State Employment Agency, the State Social Protection Fund and the State Agency on Mandatory Health Insurance.

GFS& PSDS mission (August 14 –25, 2023).

The mission held technical meetings with the main source data providers for Government Finance Statistics (GFS) and Public Sector Debt Statistics  PSDS), including the State Treasury Agency, the State Oil Fund of  Azerbaijan, the State Employment Agency, the State Social Protection Fund, the newly created State Agency on Mandatory Health Insurance and the Agency for Managing Public Debt. As requested by the authorities prior to the mission, tailored trainingsessions were delivered for these officials to emphasize the importance of GFS and to improve the data flow to the GFS team in the Ministry of Finance’s Medium-Term Expenditure Framework  enter, particularly for compiling quarterly GFS. The mission reviewed the Annual GFS for 2022 and quarterly GFS for 2022Q3. The mission provided advice to address compilation issues mostly related toconsolidation. The mission also reviewed quarterly PSDS from 2022Q4 to 2023Q2 covering budgetarygeneral government and discussed the need to ensure consistency of general government data between GFS and PSDS. As the next step, the GFS team will finalize and report to IMF annual GFS for 2022 by the end of 2023. The PSDS compilers and GFS team will initiate reporting quarterly PSDS to the joint World Bank / IMF database.

Improving the Quality of Annual and Quarterly GFS (November 3 – 16, 2022).

The virtual government finance statistics (GFS) TA mission assisted the staff of the Ministry of Finance’s Medium-Term Expenditure Framework Development Center in the further development of annual and quarterly fiscal statistics that support surveillance. During the mission, the Azerbaijani compilers prepared the annual GFS reporting for fiscal years 2020 and 2021 and quarterly GFS reporting for the first two quarters of 2022. The representatives of the State Oil Fund of the Republic of Azerbaijan, the State Employment Agency, and the State Social Protection Fund, the agencies that make up the consolidated general government sector, also participated in the discussions. Counterparts are now able to address all significant compilation issues for deriving above-the-line consolidated general government data. Moreover, the mission noted that Azerbaijan is well placed to make further progress on developing GFS - Public Sector Debt Statistics, particularly in terms of developing balance sheet information that supports deriving robust measures of gross debt, net debt and net financial worth.

Improve GFS data for policymaking (May 17-21, and July 22 - August 4, 2021)

Two missions supported the authorities’ effort to improve government finance statistics (GFS) and data for policymaking and discussed areas for further improvements. The first mission identified and discussed several compilation challenges and advised on improving compilation practices. The second part of the remote TA focused on implementation. It supported the authorities in addressing some of the challenges. For example, the team established a bridge table that can be used to correctly classify nonfinancial transactions. Also, the classification of transfers from the central bank to the ministry was reviewed. In addition to the bilateral technical work with the GFS team, a three-day workshop was offered for source data providers and users of GFS as inputs for other statistical products to sensitize these stakeholders.

GDP mission (April 15–26, 2024). The mission assisted the State Statistical Committee of Azerbaijan (SSC) in developing the system of quarterly national accounts. The SSC has been working for the past few years to implement discrete quarterly GDP in line with international best practice. For this purpose, a chain-linked time series of quarterly GDP data was compiled using the benchmarking and annual overlap technique, as recommended in the 2017 IMF Manual on Quarterly National Accounts. At this point, the discrete time series of quarterly GDP by production (GDP-P) is almost complete, and more than half of the work required for the compilation of chain-linked time series of quarterly GDP by expenditure (GDP-E) is done.

Price Statistics (February 20 – 24, 2023)
A follow-up remote TA mission assisted the State Statistical Committee (SSC) of the Republic of Azerbaijan with the further development of its export and import price indices (XMPIs). The SSC has moved the data from Excel to a newly developed software platform that includes routines for the compilation of XMPIs, treatment of missing values, and quality adjustment. The SSC has compiled export price indices (XPIs) for crude petroleum, natural gas, and gold. A strategy was developed for the future development of the more difficult area of import price indices (MPIs), that would benefit from the software and experience gained from compiling XPIs.

Export and Import Price Index (XMPI) (February 14–18, 2022)

The mission assisted the State Statistical Committee of the Republic of Azerbaijan with the development of export and import price indices (XMPIs). Relevant and accurate XMPIs are necessary for deflating current-price values of exports and imports to produce improved constant-price estimates of gross domestic product (GDP) by expenditure. The development of XMPIs is also important to an understanding of the transmission of inflation and measurement of terms of trade. The mission experts (i) evaluated data sources and devised a strategy for further developing XMPIs, (ii) provided tools for determining usable (reliable) unit value indexes (UVIs) to counter undue volatility and imputation of missing values, (iii) evaluated and implemented suitable index number formulas and weighting procedures, and (iv) advised on developing associated metadata.

Developing the System of Quarterly National Accounts (November 15 – 26, 2021)

During the remote regional workshop in May 2021, the authorities requested a CCAMTAC TA mission on national accounts to develop GDP by expenditure estimates at constant prices. Following-up on the request, the State Statistical Committee of Azerbaijan (SSC) received a TA in developing the system of quarterly national accounts (QNA). A detailed action plan was developed to compile and disseminate quarterly GDP by production and quarterly GDP by expenditure at constant prices. This in turn will allow the Ministry of Economy to use these data to improve the accuracy of macroeconomic analysis and GDP forecasting.

Forum on Carbon Pricing (September 25–27, 2024). This was a joint CCAMTAC and IMF’s Fiscal Affairs Department (FAD) mission to the International Forum on Carbon Pricing held in Baku. FAD presented at the forum on revenue administration issues when implementing carbon taxation. The team held a successful introductory meeting with the State Tax Service Director General and advisors and presented the various CCAMTAC and FAD CD services and the related tools and products available. This was the first mission of the new CCAMTAC Revenue Administration Advisor and a great opportunity to meet tax officials from the region and discuss possible CD activities.